##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    August 25, 2006o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number
    000-51771
  SMART MODULAR TECHNOLOGIES
    (WWH), INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Cayman Islands

3674

20-2509518(State or Other Jurisdiction
    of
    Incorporation or Organization)

(Primary Standard Industrial
    Classification Code Number)

(I.R.S. Employer
    Identification Number)    4211 Starboard Drive
    Fremont, CA 94538 (Address of Principal
    Executive Offices)
   (510) 623-1231 (Registrants telephone
    number)
  Securities registered pursuant to Section 12(b) of the
    Exchange Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredOrdinary Shares,
    $0.00016667 par value

NASDAQ Global Select Market   Securities
    registered pursuant to Section 12(g) of the Exchange
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K þ
   o o þ
  o þ
    Form 10-K




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##### 



SMART
    MODULAR TECHNOLOGIES (WWH), INC.
  SPECIAL
    FINANCIAL REPORT
 FOR THE
    FISCAL YEAR ENDED AUGUST 25, 2006
  TABLE OF CONTENTS
  
  PART I


1Item 1.


Business


1Item 1A.


Risk
    Factors


7Item 1B.


Unresolved Staff
    Comments


22Item 2.


Properties


22Item 3.


Legal
    Proceedings


23Item 4.


Submission of
    Matters to a Vote of Security Holders


23PART II


23Item 5.


Market for the
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchase of Equity Securities


23Item 6.


Selected Financial
    Data


24Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


25Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


37Item 8.


Financial
    Statements and Supplementary Data


37Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


37Item 9A.


Controls and
    Procedures


37Item 9B.


Other
    Information


38PART III


38Item 10.


Directors and
    Executive Officers of the Registrant


38Item 11.


Executive
    Compensation


38Item 12.


Security Ownership
    of Certain Beneficial Owners and Management


38Item 13.


Certain
    Relationships and Related Transactions


38Item 14.


Principal
    Accountant Fees and Services


38PART IV


39Item 15.


Exhibits and
    Financial Statement Schedules


39SIGNATURES


93EXHIBIT 14.1EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32     i




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##### Table of Contents



PART I  Item 1.
    Business  FORWARD-LOOKING
    STATEMENTS
    Overview
  time-to-market, build-to-order
        Our
    Products and Services
    Memory
    Products
  DRAM Modules. (FP/EDO)
 1




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Flash Memory Cards and Modules.
  SRAM.
  eFlashTools and FlashTools. e-commerce
  Embedded
    Computing Products
    small-to-medium small-to-medium
 2




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TFT-LCD
    Display Products
  point-of-service,
    Product-Related
    Logistics and Services
    Design,
    Manufacturing and Test
  Design
  time-to-market.
  Manufacturing
  time-to-market
 3




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Test
    Suppliers
      Customers
    Sales,
    Support and Marketing
  on-site
 4




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Research
    and Development
  TFT-LCD
      Intellectual
    Property
       5




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Backlog
    Competition
          Employees
    Environmental
    Matters
   6




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Available
    Information
  Form 10-K, Form 10-Q, Form 8-K Form 10-K.
  Item 1A.
    Risk
    Factors  Risks
    Related to Our Business
  We are
    subject to the cyclical nature of the markets in which we
    compete and any future downturn could adversely affect our
    business.
    period-to-period
  We
    have experienced quarterly and annual losses in the past and may
    experience losses in the future.
    Declines
    in our average selling prices may result in declines in our net
    sales and gross profit.
   7




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Sales
    to a limited number of customers represent a significant portion
    of our net sales, and the loss of any key customer would
    materially harm our business.
      Our
    customers are primarily in the computing, networking,
    communications, printer, storage and industrial markets, and
    fluctuations in demand in these markets may adversely affect
    sales of our products.
  period-to-period
  Customer
    demand is difficult to accurately forecast and, as a result, we
    may be unable to optimally calibrate production to meet customer
    demand.
   8




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Order
    cancellations or reductions, product returns and product
    obsolescence could result in substantial inventory
    write-downs.
    Our
    historical financial information has been derived in part from
    our predecessor company financial statements and, as a result,
    may not reflect what our financial information would have been
    had we been a stand-alone entity during such
    periods.
    We may
    be less competitive if we fail to develop new or enhanced
    products and introduce them in a timely manner.
      first-to-market
  Our
    dependence on a small number of sole or limited source suppliers
    subjects us to certain risks and our results of operations would
    be adversely affected if we are unable to obtain adequate
    supplies in a timely manner.
   9




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The
    flash memory market is constantly evolving and competitive, and
    we may not have rights to manufacture and sell certain types of
    products utilizing emerging flash formats, or we may be required
    to pay a royalty to sell products utilizing these
    formats.
    Our
    growth strategy includes expanding our presence in the embedded
    computing and TFT-LCD markets which are competitive
    markets.
    Our
    growth initiatives require significant capital investments and
    we cannot assure you that we will realize a positive return on
    these investments.
    Industry
    consolidation could adversely affect our business by reducing
    the number of our potential significant customers and increasing
    our reliance on our existing key customers.
   10




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We may
    make acquisitions which involve numerous risks. If we are not
    successful in integrating the technologies, operations and
    personnel of acquired businesses or fail to realize the
    anticipated benefits of an acquisition, our operations may be
    adversely affected.
    
    problems integrating the purchased operations, technologies or
    products;
    costs associated with the acquisition;
    negative effects on profitability resulting from the acquisition;
    adverse effects on existing business relationships with
    suppliers and customers;
    risks associated with entering markets in which we have no or
    limited prior experience;
    loss of key employees of the acquired business; and
    litigation arising from the acquired companys operations
    before the acquisition.    We may
    not be able to maintain or improve our competitive position
    because of the intense competition in the markets we
    serve.
       11




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Our
    success is dependent on achieving design wins into commercially
    successful OEM systems and the failure to achieve design wins or
    of OEM customers to incorporate our products in their systems
    could adversely affect our operating results and
    prospects.
    Our
    business is dependent upon our OEM customers continuing to
    outsource the design and manufacturing of value added
    subsystems.
    Our
    future success is dependent on our ability to retain key
    personnel, including our executive officers, and attract
    qualified personnel. If we lose the services of these
    individuals or are unable to attract new talent, our business
    will be adversely affected.
   12




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We
    rely on third-party sales representatives to assist in selling
    our products, and the failure of these representatives to
    perform as expected could reduce our future sales.
    We
    have and will continue to incur increased costs as a result of
    becoming a reporting company.
    If we
    fail to maintain an effective system of internal controls or
    discover material weaknesses in our internal controls over
    financial reporting, we may not be able to report our financial
    results accurately or detect fraud, which could harm our
    business and the trading price of our ordinary
    shares.
    Our
    indemnification obligations to our customers and suppliers for
    product defects could require us to pay substantial
    damages.
   13




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Our
    operations in foreign countries are subject to political and
    economic risks, which could have a material adverse effect on
    us.
      Our
    inability to effectively manage our operations in foreign
    countries could harm our operating results.
  day-to-day
  Worldwide
    economic and political conditions may adversely affect demand
    for our products.
      and/or
 14




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Unfavorable
    currency exchange rate fluctuations could result in our products
    becoming relatively more expensive to our overseas customers or
    increase our manufacturing costs, each of which could adversely
    affect our profitability.
    Our
    worldwide operations could be subject to natural disasters and
    other business disruptions, which could materially adversely
    affect our business and increase our costs and
    expenses.
  and/or
  Our
    ability to compete successfully and achieve future growth will
    depend, in part, on our ability to protect our intellectual
    property, as well as our ability to operate without infringing
    the intellectual property of others.
    
    prevent our competitors from independently developing similar
    products, duplicating our products or designing around the
    patents owned by us;
    prevent third-party patents from having an adverse effect on our
    ability to do business;
    provide adequate protection for our intellectual property rights;
    prevent disputes with third parties regarding ownership of our
    intellectual property rights;
    prevent disclosure of our trade secrets and know-how to third
    parties or into the public domain;
    prevent the challenge, invalidation or circumvention of our
    existing patents; 15




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
    result in patents that lead to commercially viable products or
    provide competitive advantages for our products; and
    result in issued patents and registered trademarks from any of
    our pending applications.      Our
    indemnification obligations for the infringement by our products
    of the intellectual property rights of others could require us
    to pay substantial damages.
    We
    could incur substantial costs as a result of violations of or
    liabilities under environmental laws.
    We are
    subject to a variety of federal, state and foreign laws and
    regulatory regimes. Failure to comply with governmental laws and
    regulations could subject us to, among other things, mandatory
    product recalls, penalties and legal expenses which could have
    an adverse effect on our business.
   16




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wage-hour
      Risks
    Related to our Debt
  Our
    indebtedness could impair our financial condition and harm our
    ability to operate our business.
      
    it may limit our ability to service all of our debt obligations;
    it may impair our ability to obtain additional financing in the
    future for working capital, capital expenditures, acquisitions,
    general corporate purposes or other purposes;
    a significant portion of our cash flow from operations must be
    dedicated to the payment of interest and principal on our debt,
    which will reduce the funds available to us for our operations;
    some of our debt is and will continue to be at variable rates of
    interest, which may result in higher interest expense in the
    event of increases in interest rates;
    our debt agreements contain, and any agreements to refinance our
    debt likely will contain, financial and restrictive covenants,
    and our failure to comply with them may result in an event of
    default which, if not cured or waived, could have a material
    adverse effect on us;
    our level of indebtedness will increase our vulnerability to
    general economic downturns and adverse industry
    conditions; and
    our debt service obligations could limit our flexibility in
    planning for, or reacting to, changes in our business and our
    industry. 17




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To
    service our debt, we will require a significant amount of cash
    and we may not be able to generate sufficient cash flow from
    operations to satisfy these obligations or to refinance these
    obligations on acceptable terms, or at all.
      Our
    existing debt is subject to floating interest rates, which may
    cause our interest expense to increase and decrease cash
    available for operations and other purposes.
    Restrictive
    covenants contained in our senior secured credit facility and
    the indenture relating to our senior secured floating rate notes
    may restrict our current and future operations, particularly our
    ability to respond to changes or to take some actions and our
    failure to comply with such covenants, whether due to events
    beyond our control or otherwise, could result in an event of
    default which could materially and adversely affect our
    operating results and our financial condition.
     18




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Risks
    Related to Our Ordinary Shares
  The
    price of our ordinary shares may be volatile and subject to wide
    fluctuations.
    
    actual or anticipated variations in quarterly operating results;
    changes in financial estimates by us or by any securities
    analysts who might cover our stock, or our failure to meet the
    estimates made by securities analysts;
    changes in the market valuations of other companies operating in
    our industry;
    announcements by us or our competitors of significant
    acquisitions, strategic partnerships or divestitures;
    additions or departures of key personnel; and
    a general downturn in the stock market.    We may
    experience significant
    period-to-period
    quarterly and annual fluctuations in our net sales and operating
    results, which may result in volatility in our share
    price.
  period-to-period
    
    the timing and volume of orders from our customers;
    the rate of acceptance of our products by our customers,
    including the acceptance of design wins;
    the demand for and life cycles of the products incorporating our
    products;
    the rate of adoption of our products in the end markets we
    target;
    cancellations or deferrals of customer orders in anticipation of
    new products or product enhancements from us or our competitors
    or other providers;
    changes in product mix; and
    the rate at which new markets emerge for products we are
    currently developing or for which our design expertise can be
    utilized to develop products for these new markets. 19




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We are
    controlled by our principal investors and, as long as they own a
    significant percentage of our ordinary shares, our other
    shareholders will be unable to affect the outcome of shareholder
    voting.
      
    mergers, acquisitions or certain sales of assets;
    any liquidation, dissolution or bankruptcy;
    issuances of securities;
    determination of compensation and benefits for our chief
    executive officer, president and chief financial officer;
    appointment or dismissal of any of the chairman of our board of
    directors, chief executive officer, president, chief financial
    officer, or any other executive officer in any similar capacity;
    amendments to the shareholders agreement or exercise or
    waiver of rights under the shareholders agreement;
    any increase or decrease in the number of directors that
    comprise our board of directors;
    the declaration of dividends or other distributions or the
    recapitalization, reclassification, redemption, repurchase or
    other acquisition of any of our or our subsidiaries
    securities;
    any incurrence or refinancing of indebtedness in excess of
    $10 million;
    approval of our business plan, budget and strategy; and
    modification of our long-term business strategy, the scope of
    our business or any of our material customer relationships.      Our
    articles of association do not provide for shareholder proposals
    other than nominations to our board of directors and do not
    explicitly provide for periodic elections of our directors, each
    of which could negatively affect the ability of shareholders to
    exercise control over us.
   20




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Our
    principal investors and the persons whom they nominate to our
    board of directors may have interests that conflict with our
    interests and the interests of our other
    shareholders.
    Future
    sales of shares could depress our share price.
    Anti-takeover
    provisions in our organizational documents may discourage our
    acquisition by a third party, which could limit your opportunity
    to sell your shares at a premium.
    We are
    a Cayman Islands company and, because the rights of shareholders
    under Cayman Islands law differ from those under U.S. law,
    you may have difficulty protecting your shareholder
    rights.
   21




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
    to recognize or enforce against us judgments of courts of the
    United States based on certain civil liability provisions of
    U.S. securities laws; or
    to impose liabilities against us, in original actions brought in
    the Cayman Islands, based on certain civil liability provisions
    of U.S. securities laws that are penal in nature.      Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Building SizeLocation

(Sq. Feet)


Leased or Owned


Expiration

CapabilitiesFremont, California


130,000



Leased


April 2009

ManufacturingDesignSalesIrvine, California


5,600



Leased


August 2009

DesignSalesTewksbury, Massachusetts


10,700



Leased


March 2011

DesignSalesAguada, Puerto Rico


51,000



Leased


October 2007

ManufacturingSalesSao Paulo, Brazil


49,000



Leased


December 2012

ManufacturingSalesSanto Domingo, Dominican Republic


49,000



Leased


March 2008

ManufacturingPenang, Malaysia


67,000



Owned


N/A

ManufacturingSalesGunpo, South Korea


8,500



Owned


N/A

DesignSales    22




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Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for the Registrants Common Equity, Related Shareholder
    Matters and Issuer Purchase of Equity Securities  Market
    For Our Common Stock and Related Shareholder Matters
    High


LowFiscal Year 2006First quarter

$
N/A


$
N/ASecond quarter

$
9.09


$
8.00Third quarter

$
9.73


$
7.90Fourth quarter

$
9.79


$
6.98     Dividend
    Policy
   23




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Item 6.
    Selected
    Financial Data      53-week
  Successor Business



Predecessor BusinessPeriod fromFiscal Year


Fiscal Year


Period from



September 1,


Fiscal Year


Fiscal YearEnded


Ended


April 17 to



2003 to


Ended


EndedAugust 31,


August 31,


August 31,



April 16,


August 31,


August 31,2006


2005


2004



2004


2003


2002(In thousands, except per share data)Statement of Operations
    Data:Net sales

$
707,406


$
607,299


$
233,677



$
659,171


$
828,381


$
626,363Cost of sales


580,835



505,983



203,720




602,098



751,534



583,581Gross profit


126,571



101,316



29,957




57,073



76,847



42,782Operating expenses:Research and development


15,545



9,697



4,447




9,012



12,512



13,830Selling, general and administrative


54,917



46,636



18,151




29,454



46,447



51,083Advisory service agreements
    fees


10,303



2,588



913












Impairment of goodwill















43,302







Restructuring and impairment costs






880



1,300




6,224



8,221



8,332Total operating expenses


80,765



59,801



24,811




87,992



67,180



73,245Income (loss) from operations


45,806



41,515



5,146




(30,919
)


9,667



(30,463
)Interest income (expense), net


(15,153
)


(6,998
)


(927
)



170



7,685



14,209Other income (expense), net


2,567



481



451




(148
)


(52
)


(1,581
)Total other income (expense)


(12,586
)


(6,517
)


(476
)



22



7,633



12,628 24




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Successor Business



Predecessor BusinessPeriod fromFiscal Year


Fiscal Year


Period from



September 1,


Fiscal Year


Fiscal YearEnded


Ended


April 17 to



2003 to


Ended


EndedAugust 31,


August 31,


August 31,



April 16,


August 31,


August 31,2006


2005


2004



2004


2003


2002(In thousands, except per share data)Income (loss) before provision
    (benefit) for income taxes


33,220



34,998



4,670




(30,897
)


17,300



(17,835
)Provision (benefit) for income
    taxes


914



8,802



1,255




2,301



29,320



(9,903
)Net income (loss)

$
32,306


$
26,196



3,415



$
(33,198
)

$
(12,020
)

$
(7,932
)Net income per ordinary share,
    basic

$
0.60


$
0.54


$
0.07Net income per ordinary share,
    diluted

$
0.55


$
0.49


$
0.07Shares used in computing net
    income per ordinary share, basic


54,265



48,872



48,872Shares used in computing net
    income per ordinary share, diluted


59,189



53,531



50,745   Successor Business



Predecessor BusinessAugust 31,


August 31,


August 31,



April 16,


August 31,


August 31,2006


2005


2004



2004


2003


2002(In thousands)Balance Sheet Data:Cash and cash equivalents

$
85,620


$
75,970


$
36,747



$
17,887


$
44,654


$
33,326Working capital


181,031



132,165



49,681




80,531



360,021



333,137Total assets


426,456



321,061



288,040




257,056



600,104



567,420Total long-term debt


81,250



125,000
















Total shareholders equity


146,895



38,883



76,594




88,325



426,578



447,264   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion should be read in conjunction with
    the audited financial statements and related notes and other
    financial information, which appear elsewhere in this report.
    The following discussion contains forward-looking statements
    that involve risks and uncertainties. See the disclosure
    regarding Forward-Looking Statements. Our actual
    results could differ materially from the results contemplated by
    these forward-looking statements due to certain factors,
    including those factors discussed below and elsewhere in this
    report.
  We use a 52- to
    53-week
    fiscal year ending on the last Friday in August. For ease of
    presentation, we have indicated our fiscal year as ending on
    August 31. Unless the context indicates otherwise, whenever
    we refer in this report to a particular year, with respect to
    ourselves, we mean the fiscal year ending in that particular
    calendar year.
  Overview
   25




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Key
    Business Metrics
    Net
    Sales
    Cost
    of Sales
    Research
    and Development Expenses
   26




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Selling,
    General and Administrative Expenses
    Impact of
    Change to a Services Agreement on Net Revenue
    Reporting
    Basis of
    Presentation
       27




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Critical
    Accounting Policies
      Revenue
    Recognition
    No. 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent.
    Fiscal Year Ended August 31,20042006


2005


Combined(2)(In thousands)Product net sales

$
663,667


$
568,462


$
875,140Service revenue


43,739



38,837



17,708Net sales


707,406



607,299



892,848Plus:Related cost of sales(1)


773,786



742,710



484,556Gross billings to customers

$
1,481,192


$
1,350,009


$
1,377,404     (1)
    
    Represents cost of sales netted against sales accounted for on
    an agency basis.(2)
    
    The combined financial results for 2004 represent the sum of the
    financial data for our Predecessor Business for the period from
    September 1, 2003 through April 16, 2004 and the
    financial data for SMART for the period commencing
    April 17, 2004 through August 31, 2004 for 2004. The
    combined financial data for 2004 is presented to facilitate
    comparison with other periods and does not purport to be a
    presentation in accordance with accounting principles generally
    accepted in the United States of America. 28




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Accounts
    Receivable
    Inventory
    Valuation
  first-in,
  Restructuring
    Charges
    Income
    Taxes
  Successor Business.
  Predecessor Business.
 29




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Impairment
    of Long-Lived Assets and Long-Lived Assets to be
    Disposed
    Stock-Based
    Compensation
  Share-Based Payment.
  Successor Business. intrinsic-value-based Accounting for Stock Issues to Employees Accounting for Certain Transactions Involving Stock
    Compensation, an Interpretation of APB Opinion No. 25
  Predecessor Business.
  Results
    of Operations
    Fiscal Year Ended August 31,2006


2005


2004 Combined(1)(In millions)Net sales

$
707.4


$
607.3


$
892.8Cost of sales


580.8



506.0



805.8Gross profit

$
126.6


$
101.3


$
87.0Operating expenses:Research and development

$
15.5


$
9.7


$
13.4Selling, general and administrative


54.9



46.6



47.6Advisory service agreements
    fees


10.3



2.6



0.9Impairment of goodwill










43.3Restructuring and impairment costs






0.9



7.5Total operating expenses(2)


80.8



59.8



112.7Income (loss) from operations


45.8



41.5



(25.7
)Interest expense, net


(15.2
)


(7.0
)


(0.8
)Other income, net


2.6



0.5



0.3Total other expense, net


(12.6
)


(6.5
)


(0.5
)Income (loss) before provision for
    income taxes


33.2



35.0



(26.2
)Provision for income tax


0.9



8.8



3.6Net income (loss)

$
32.3


$
26.2


$
(29.8
)  30




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##### Table of Contents



(1)
    
    The combined financial results for 2004 represent the sum of the
    financial data for our Predecessor Business for the period from
    September 1, 2003 through April 16, 2004 and the
    financial data for SMART for the period commencing
    April 17, 2004 through August 31, 2004. The combined
    financial data for 2004 is presented to facilitate comparison
    with other periods and does not purport to be a presentation in
    accordance with accounting principles generally accepted in the
    United States of America.(2)
    
    Summations may not compute precisely due to rounding.  Fiscal
    Year Ended August 31, 2006 Compared to Fiscal Year Ended
    August 31, 2005
  Net Sales.
  Cost of Sales.
  Gross Profit.
  Research and Development Expenses.
  Selling, General and Administrative
    Expenses.
  Advisory Service Agreements Fees.
  Restructuring and Impairment Costs.
  Interest Expense, Net.
 31




---



##### Table of Contents



Other Income, Net. Accounting for Derivative Instruments
    and Hedging Activities.
  Provision for Income Taxes.
    Fiscal
    Year Ended August 31, 2005 Compared to Fiscal Year Ended
    August 31, 2004
  Net Sales.
  Cost of Sales.
 32




---



##### Table of Contents



Gross Profit.
  Research and Development Expenses.
  Selling, General and Administrative
    Expenses.
  Restructuring and Impairment
    Costs.
  Impairment of Goodwill.
  Interest Income (Expense), Net.
  Other (Expense) Income, Net.
  Provision for Income Taxes.
  Liquidity
    and Capital Resources
    Debt
    Service
   33




---



##### Table of Contents



Senior Secured Credit Facility.
  Senior Secured Floating Rate Exchange Notes Due April
    2012.
    Capital
    Expenditures
  and/or
  Sources
    of Funds
     34




---



##### Table of Contents



Historical
    Trends
    Cash Flows from Operating Activities.
    Cash Flows from Investing Activities.
    Cash Flows from Financing Activities.
    Contractual
    Obligations
    Payments
    Due by Period
  After1 Year


2-3 Years


4-5 Years


5 Years


Total(In millions)Total debt

$



$



$



$
81.3


$
81.3Interest expense cash obligations
    in connection with long-term debt and related interest rate swaps


8.9



17.9



17.9



5.2



49.9Operating leases


2.0



3.1



1.2



0.5



6.8Total contractual cash obligations

$
10.9


$
21.0


$
19.1


$
87.0


$
138.0  35




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Inflation
    Recent
    Accounting Pronouncements
  Inventory Costs, an amendment of ARB No. 43,
    Chapter 4.
  Accounting for
    Conditional Asset Retirement Obligations Accounting for Asset Retirement
    Obligations. and/or and/or
  Accounting Changes and Error Corrections APB No. 20, Accounting Changes and SFAS No. 3,
    Reporting Accounting Changes in Interim Financial
    Statements.
  Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109 Accounting for Income Taxes.
  Fair Value Measurements.
 36




---



##### Table of Contents



Considering the Effects of Prior Year
    Misstatements when Quantifying Misstatements in Current Year
    Financial Statements
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Foreign
    Exchange Risks
    Interest
    Rate Risk
    Item 8.
    Financial
    Statements and Supplementary Data    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation of Disclosure Controls and
    Procedures.
 37




---



##### Table of Contents



Rules 13a-15(e) 15d-15(e)) Rules 13a-15 15d-15.
  Changes in Internal Control Over Financial
    Reporting. Rules 13a-15 15d-15
 Item 9B.  Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant    www.smartm.com
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and
    Management    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   38




---



##### Table of Contents



PART IV Item 15.  Exhibits
    and Financial Statement Schedules.  (a)(1)  Financial Statements
    PageAudited Financial
    Statements:Report of
    Independent Registered Public Accounting Firm


40Consolidated
    Balance Sheets


41Consolidated and
    Combined Statements of Operations


42Consolidated and
    Combined Statements of Business/Shareholders Equity and
    Other Comprehensive Income (Loss)


43Consolidated and
    Combined Statements of Cash Flows


44Notes to
    Consolidated and Combined Financial Statements


45Audited Financial Statements of
    a Material Subsidiary:Independent
    Auditors Report


71Balance
    Sheets


72Income
    Statements


73Statements of
    Changes in Shareholders Equity


74Cash Flow
    Statements


75Notes to the
    Financial Statements


77   (a)(2)  Financial Statement Schedules
    Schedules:Schedule II 
    Valuation and Qualifying Accounts


92   (a)(3)  Exhibits
   39




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Share-Based
    Payment
  
    40




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONSOLIDATED
    BALANCE SHEETS

August 31, 2006 AND 2005 2006


2005(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
85,620


$
75,970Short term investments






5,071Accounts receivable, net of
    allowances of $2,592 and $2,629 as of August 31, 2006 and
    2005, respectively


208,652



144,760Inventories


65,902



53,122Prepaid expenses and other


17,531



9,459Total current assets


377,705



288,382Property and equipment, net


25,971



11,309Goodwill


3,187



2,248Intangible assets






9,142Other non-current assets


19,593



9,980Total assets

$
426,456


$
321,061LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
169,349


$
125,305Accrued expenses


27,325



29,912Advance from customer






1,000Total current liabilities


196,674



156,217Long-term debt


81,250



125,000Other long-term liabilities


1,637



961Total liabilities

$
279,561


$
282,178Commitments and contingenciesShareholders equity:Ordinary shares,
    $0.00016667 par value; 600,000,000 shares authorized;
    58,430,803 and 48,872,340 shares issued and outstanding as
    of August 31, 2006 and 2005, respectively


10



8Additional paid-in capital


85,251



9,490Deferred stock-based compensation


(555
)


(1,126
)Accumulated other comprehensive
    income


272



900Retained earnings


61,917



29,611Total shareholders equity


146,895



38,883Total liabilities and
    shareholders equity

$
426,456


$
321,061    41




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONSOLIDATED
    AND COMBINED STATEMENTS OF OPERATIONS  PredecessorSuccessor Business



BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31,


August 31,


August 31,



April 16,2006


2005


2004



2004(In thousands, except per share amounts)Net sales


707,406



607,299



233,677




659,171Cost of sales*


580,835



505,983



203,720




602,098Gross profit


126,571



101,316



29,957




57,073Operating expenses:Research and development*


15,545



9,697



4,447




9,012Selling, general, and
    administrative*


54,917



46,636



18,151




29,454Advisory service agreements
    fees


10,303



2,588



913




Impairment of goodwill















43,302Restructuring and impairment costs






880



1,300




6,224Total operating expenses*


80,765



59,801



24,811




87,992Income (loss) from operations


45,806



41,515



5,146




(30,919
)Interest (expense) income, net


(15,153
)


(6,998
)


(927
)



170Other income (expense), net


2,567



481



451




(148
)Total other (expense) income


(12,586
)


(6,517
)


(476
)



22Income (loss) before provision for
    income taxes


33,220



34,998



4,670




(30,897
)Provision for income taxes


914



8,802



1,255




2,301Net income (loss)


32,306



26,196


$
3,415



$
(33,198
)Net income per ordinary share,
    basic

$
0.60


$
0.54


$
0.07Shares used in computing basic net
    income per ordinary share


54,265



48,872



48,872Net income per ordinary share,
    diluted

$
0.55


$
0.49


$
0.07Shares used in computing diluted
    net income per ordinary share


59,189



53,531



50,745* Stock-based compensation
    by category:Cost of sales

$
191


$



$




$
Research and development


578












Selling, general and administrative


1,216



227








    42




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  CONSOLIDATED AND COMBINED STATEMENTS OF
    BUSINESS/SHAREHOLDERS EQUITY AND
 OTHER COMPREHENSIVE INCOME (LOSS)
  Series A














AccumulatedRedeemable








Additional


Deferred Stock-


Other





Total Business/Preferred Shares


Ordinary Shares


Paid-In


Based


Comprehensive


Retained


Shareholders


ComprehensiveShares


Amount


Shares


Amount


Capital


Compensation


Income (Loss)


Earnings


Equity


Income (Loss)(Dollars in thousands)Predecessor BusinessBalances as of August 31, 2003


















216,763







366



209,449



426,578Dividends to Solectron






























(31,247
)


(31,247
)Net return of capital to Solectron


















(128,439
)










(145,004
)


(273,443
)Unrealized loss on investments


























(2
)






(2
)

$
(2
)Foreign currency translation


























(363
)






(363
)


(363
)Net loss






























(33,198
)


(33,198
)


(33,198
)Balances as of April 16, 2004


















88,324







1







88,325


$
(33,563
)Successor BusinessBalances as of April 17, 2004


































Issuance of ordinary shares










48,872,340



8



8,137















8,145Issuance of series A
    redeemable preferred shares


1,024,700



65,140



























65,140Foreign currency translation


























(106
)






(106
)


(106
)Net income






























3,415



3,415



3,415Balances as of August 31, 2004


1,024,700



65,140



48,872,340



8



8,137







(106
)


3,415



76,594


$
3,309Repurchase of series A
    redeemable preferred shares


(1,024,700
)


(65,140
)


























(65,140
)Foreign currency translation


























994







994



994Deferred stock-based compensation


















1,353



(1,353
)










Amortization of deferred
    stock-based compensation






















227











227Other


























12







12



12Net income






























26,196



26,196



26,196Balances as of August 31, 2005










48,872,340


$
8


$
9,490


$
(1,126
)

$
900


$
29,611


$
38,883


$
27,202Stock-option exercises










467,554







103















103Issuance of ordinary shares in an
    initial public offering










9,090,909



2



74,172















74,174Foreign currency translation


























89







89



89Stock-based compensation expense


















1,414



571











1,985Changes in fair value of derivative
    instruments accounted for as cash flow hedges


























(717
)






(717
)


(717
)Tax benefit for stock-option
    exercise


















72















72Net income






























32,306



32,306



32,306Balances as of August 31, 2006










58,430,803


$
10


$
85,251


$
(555
)

$
272


$
61,917


$
146,895


$
31,678    43




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONSOLIDATED
    AND COMBINED STATEMENTS OF CASH FLOWS  PredecessorSuccessor Business



BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31,


August 31,


August 31,



April 16,2006


2005


2004



2004(Dollars in thousands)Cash flows from operating
    activities:Net income (loss)

$
32,306


$
26,196


$
3,415



$
(33,198
)Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating activities:Depreciation and amortization


8,673



8,505



3,306




5,350Note redemption charge


4,388












Stock-based compensation


1,985



227








Impairment of property, equipment
    and goodwill






65








48,977Amortization of debt issuance costs


2,317



412








Gain on sale of assets


(64
)


(69
)







Deferred income tax provision


(3,679
)


931








Change in fair value of derivative
    instruments


(2,287
)











Changes in operating assets and
    liabilities:Accounts receivable, net of
    allowance


(76,833
)


24,930



(18,570
)



(18,052
)Inventories


(10,402
)


(8,118
)


28,445




(13,867
)Prepaid expenses and other assets


(6,358
)


(2,154
)


2,927




(1,214
)Accounts payable


53,213



(3,372
)


(13,369
)



23,406Payable to affiliates















(8,262
)Accrued expenses and other current
    liabilities


(2,758
)


7,921



(633
)



(9,203
)Other non-current liabilities






112








Net cash provided by (used in)
    operating activities


501



55,586



5,521




(6,063
)Cash flows from investing
    activities:Purchase of predecessor business,
    net of cash acquired










(104,081
)



Cash paid for acquisition of
    business, net of cash acquired


(680
)


(2,260
)







Sale (purchase) of short-term
    investments


5,071



(5,071
)







Capital expenditures


(20,431
)


(6,109
)


(670
)



(2,495
)Proceeds from sale of property and
    equipment


131



284



522




2,344Other


(5
)


253



776




301Net cash (used in) provided by
    investing activities


(15,914
)


(12,903
)


(103,453
)



150Cash flows from financing
    activities:Dividends paid















(31,247
)Proceeds from issuance of long-term
    debt, net of debt issuance costs






120,120








Advance from customer


(1,000
)


(4,000
)







5,000Advances from (payments to)
    affiliates















(3,584
)Net (payments) advances on other
    debt






(1,524
)


(10,000
)



10,000Net (repayments) advances on
    revolving line of credit






(53,126
)


52,444




Proceeds from issuance of ordinary
    shares from stock option exercises


103












Redemption of Notes


(48,138
)











Other










1,079




(989
)Proceeds from issuance of ordinary
    shares


74,174







8,145




(Repurchase) sale of series A
    redeemable preferred shares






(65,140
)


65,140




Net cash (used in) provided by
    financing activities


25,139



(3,670
)


116,808




(20,820
)Effect of exchange rate changes on
    cash and cash equivalents


(76
)


210



(16
)



(34
)Net increase (decrease) in cash and
    cash equivalents


9,650



39,223



18,860




(26,767
)Cash and cash equivalents at
    beginning of period


75,970



36,747



17,887




44,654Cash and cash equivalents at end of
    period

$
85,620


$
75,970


$
36,747



$
17,887Supplemental disclosures of cash
    flow information:Cash paid during the year:Interest

$
14,499


$
5,539


$
472



$
Taxes


3,542



3,370



346




263Non-cash financing activity:Non-cash dividend/return of capital
    to Solectron















273,443    44




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
 August 31, 2006 and 2005
  (1)  Summary
    of Significant Accounting Policies
  (a)
    Organization
    and Operations of the Company                (b)
    Basis
    of Presentation  Successor
    Business
   45




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  Predecessor
    Business
        (c)
    Acquisition
    of Businesses    Allocation ofPurchase PriceCurrent assets

$
260,192Property and equipment


15,026Goodwill


138Intangibles


18,296Other assets


918Total assets acquired


294,570Current liabilities


168,732Deferred tax
    liabilities  non-current


3,870Total liabilities assumed


172,602Net assets acquired

$
121,968      46




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    (d)
    Year-End    (e)
    Use of
    Estimates    (f)
    Revenue
    Recognition  Revenue Recognition.
  No. 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent.
  (g)
    Cash
    and Cash Equivalents  held-to-maturity
  (h)
    Allowance
    for Doubtful Accounts   47




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    (i)
    Inventories  first-in,
  (j)
    Property
    and Equipment    Asset

PeriodBuildings

20 to 50 yearsManufacturing equipment

3 to 5 yearsOffice furniture, software,
    computers, and equipment

2 to 5 yearsLeasehold improvements

Shorter of estimated
    life or lease term   (k)
    Goodwill     48




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    (l)
    Intangibles    August 31,


August 31,Life


2006


2005Customer relationships


5


$
11,797


$
11,797Technology


3



1,826



1,826Trademark


7



4,680



4,680Total






18,303



18,303Accumulated amortization






(6,141
)


(3,774
)Other deductions






(12,162
)


(5,387
)Carrying value





$



$
9,142         (m)
    Impairment
    of Long-Lived Assets  Accounting for
    the Impairment or Disposal of Long-Lived Assets
  (n)
    Income
    Taxes  Successor
    Business
   49




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    Predecessor
    Business
    (o)
    Foreign
    Currency Translation        (p)
    Stock-Based
    Compensation  Successor
    Business
  10-year
  Accounting for Stock Issued to Employees
  Share-Based
    Payment
 50




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
        Summary
    of Assumptions and Activity
  Share-Based Payment.
  Year EndedAugust 31, 2006Stock options:Expected term (years)


6.25Expected volatility


80
%Risk-free interest rate


4.63
%Expected dividends


     WeightedAverageWeighted


RemainingAverage


Contractual


AggregateExercise


Term


IntrinsicShares


Price


(Years)


ValueOptions outstanding at
    September 1, 2005


5,478


$
0.29Options granted


2,133



5.09Options exercised


(467
)


(0.22
)Options forfeited


(353
)


(2.59
)Options outstanding at
    August 31, 2006


6,791



1.68



8.3


$
50,800Options exercisable at
    August 31, 2006


2,660


$
0.60



8.0


$
22,780Options vested and expected to
    vest at August 31, 2006


6,534


$
1.63



8.3


$
49,226    51




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      Predecessor
    Business
  Accounting for Stock-Based Compensation
  fair-value-based Accounting for Stock-Based
    Compensation  Transition and Disclosure.
  Period EndedApril 16, 2004Net loss, as reported

$
(33,198
)Pro forma stock-based compensation


(3,672
)Pro forma net loss

$
(36,870
)    52




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    Period EndedApril 16,2004Stock options:Expected life

3.9 yearsVolatility

75%Risk-free interest rate

2.30% to 3.06%Dividend yield

Employee stock purchase plan:Expected life of purchase right

6 monthsVolatility

75%Risk-free interest rate

1.00%Dividend yield

   (q)
    Loss
    Contingencies    (r)
    Comprehensive
    Income (Loss)  available-for-sale.
  (s)
    Concentration
    of Credit Risk and Fair Value of Financial
    Instruments    (t)
    Net
    Income Per Share  Successor
    Business
   53




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      Year Ended


Year Ended


Period EndedAugust 31,


August 31,


August 31,2006


2005


2004Numerator:Net Income

$
32,306


$
26,196


$
3,415Denominator:Weighted average ordinary shares


54,265



48,872



48,872Effect of dilutive ordinary shares:Stock options


4,924



4,659



1,873Total ordinary shares, diluted


59,189



53,531



50,745Net income per ordinary share,
    basic

$
0.60


$
0.54


$
0.07Net income per ordinary share,
    diluted

$
0.55


$
0.49


$
0.07     (u)
    New
    Accounting Pronouncements  Inventory Costs, an
    amendment of ARB No. 43, Chapter 4.
  Accounting for
    Conditional Asset Retirement Obligations Accounting for
    Asset Retirement Obligations. and/or and/or
  Accounting Changes and Error Corrections Accounting Changes Reporting Accounting Changes in Interim
    Financial Statements.
 54




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement
    No. 109 Accounting for Income Taxes.
  Fair Value Measurements.
  Considering the Effects of Prior Year Misstatements when
    Quantifying Misstatements in Current Year Financial
    Statements
  (2)  Related
    Party Information
  (a)
    Predecessor
    Business    Period EndedApril 16, 2004Affiliates of Solectron:Revenues

$
80,572Purchase of goods and services


(6,309
)     (b)
    Successor
    Business   55




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
        (3)  Inventories
    2006


2005Raw materials

$
29,249


$
23,765Work in process


5,098



5,680Finished goods


31,555



23,677$
65,902


$
53,122     (4)  Net
    Property and Equipment
    2006


2005Buildings

$
702


$
585Office furniture, software,
    computers, and equipment


4,155



4,453Manufacturing equipment


25,568



12,149Leasehold improvements


9,088



2,92639,513



20,113Less accumulated depreciation and
    amortization


13,542



8,804Net property and equipment

$
25,971


$
11,309  56




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    (5)  Income
    Taxes
    PredecessorSuccessor Business



BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31,


August 31,


August 31,



April 16,2006


2005


2004



2004Current:Federal

$
527


$
2,130


$
368



$
114State


267



336



29




72Foreign


3,799



5,405



1,008




2,1154,593



7,871



1,405




2,301Deferred:Federal and state


(3,776
)











Foreign


97



931



(150
)



(3,679
)


931



(150
)



$
914


$
8,802


$
1,255



$
2,301     PredecessorSuccessor Business



BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31,


August 31,


August 31,



April 16,2006


2005


2004



2004Statutory tax rate


35.0
%


35.0
%


35.0
%



(35.0
)%Foreign income taxes at different
    rates


(12.1
)


(7.9
)


18.0




6.0State income tax, net of federal
    tax benefit


0.9



0.6



0.6




0.2Tax holiday  Malaysia


(9.7
)


(8.8
)


(29.6
)



(10.5
)Nondeductible goodwill impairment















42.3Change in valuation allowance


(11.4
)


0.3



2.0




4.3Deferred tax asset
    write-off  Malaysia






3.9








Foreign withholding taxes






2.7








Other, net


0.1



(0.6
)


0.9




0.22.8
%


25.2
%


26.9
%



7.5
%  57




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    2006


2005Deferred tax assets:Accruals and allowances

$
4,451


$
6,756Stock-based compensation


681



92Credits carryover


247



482Capital loss carryover


1,743



1,743Net operating loss carryover


16,520



15,769Deferred tax assets


23,642



24,842Valuation allowance


(13,212
)


(22,226
)Net deferred tax assets


10,430



2,616Deferred tax liabilities:Property and equipment


(80
)


(105
)Acquired intangibles






(2,563
)Deferred tax liabilities


(80
)


(2,668
)Net deferred tax assets
    (liabilities)

$
10,350


$
(52
)           Share-Based Payment
     58




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
        PredecessorSuccessor Business



BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31,


August 31,


August 31,



April 16,2006


2005


2004



2004U.S.

$
410


$
5,667


$
(42
)


$
(40,583
)Non-U.S.


32,810



29,331



4,712




9,686Total

$
33,220


$
34,998


$
4,670



$
(30,897
)    59




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  (6)  Accrued
    Expenses
    2006


2005Accrued employee compensation

$
12,108


$
9,555Accrued income taxes


3,879



2,524Other accrued liabilities


11,338



17,833Total

$
27,325


$
29,912   (7)  Advance
    from Customer
    (8)  Long
    Term Debt
  Senior
    Secured Floating Rate Notes
         60




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  Revolving
    Line of Credit
          (9)  Financial
    Instruments
  Fair
    Value of Financial Instruments
    Derivative
    Instruments
  3-month
 61




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      Accounting for Derivative Instruments
    and Hedging Activities.
  (10)  Employee
    Benefit Plans
  (a)
    Stock
    Option Plan  Predecessor
    Business
  4-year 10-year
    Number ofSolectron


Weighted AverageShares


Exercise PriceOutstanding, August 31, 2003


4,097


$
14.65Granted


393



5.58Exercised


(18
)


3.84Canceled


(320
)


16.87Outstanding, April 16, 2004


4,152



13.67Cancellation of options upon
    acquisition by SMART


(4,152
)


13.67Outstanding, April 17, 2004





$
     Successor
    Business
   62




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  4-year 10-year
    Number of


Weighted AverageShares


Exercise PriceOutstanding, April 17, 2004





$
Granted


4,960



0.17Exercised






Forfeited






Outstanding, August 31, 2004


4,960



0.17Granted


1,140



0.76Exercised






Forfeited


(622
)


0.20Outstanding, August 31, 2005


5,478



0.29Granted


2,133



5.09Exercised


(467
)


(0.22
)Forfeited


(353
)


(2.59
)Options outstanding at
    August 31, 2006


6,791


$
1.68     Options Outstanding


Options VestedWeighted AverageRemaining


Weighted





WeightedRange of Exercise


Shares


Contractual Life


Average





AveragePrices


Outstanding


(Years)


Exercise Price


Shares Vested


Exercise Price$
0.17



4,253



7.8


$
0.17



2,227


$
0.17$
0.98



404



8.4


$
0.98



152


$
0.98$
2.09



700



9.0


$
2.09



109


$
2.09$
4.71



875



9.0


$
4.71



165


$
4.71$
7.22 - 7.84



170



9.9


$
7.57



4


$
7.74$
8.51



133



9.3


$
8.51



2


$
8.51$
8.62



74



9.6


$
8.62



1


$
8.62$
8.74



53



9.7


$
8.74






$
$
9.20



10



10.0


$
9.20






$
$
9.39



119



9.7


$
9.39






$
$
0.17 - 9.39



6,791



8.3


$
1.68



2,660


$
0.60   (b)
    Employee
    Stock Purchase Plan  Predecessor   63




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      (c)
    Savings
    and Retirement Program  Predecessor
    Business
    Successor
    Business
    (11)  Commitments
    and Contingencies
  (a)
    Lease
    Agreement with Solectron  Successor
    Business
      (b)
    Commitments   64




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    Year EndingAugust 312007

$
2,0122008


1,8142009


1,3242010


6182011


5412012 and thereafter


500$
6,809   (d)
    Product
    Warranties      PredecessorSuccessor Business



BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31, 2006


August 31, 2005


August 31, 2004



April 16, 2004Beginning accrued warranty reserve

$
1,044


$
1,098


$
1,067



$
960Warranty claims


(1,430
)


(638
)


(230
)



(819
)Provision for product warranties


891



584



261




926Ending accrued warranty reserve

$
505


$
1,044


$
1,098



$
1,067     (e)
    Legal
    Matters    (12)  Restructuring
  Accounting for the Impairment or Disposal of Long-
 65




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  Lived Assets. Employers Accounting for
    Postemployment Benefits Accounting for Costs Associated with Exit or Disposal
    Activities.
  (a)
    Period
    Ended April 16, 2004  Predecessor
    Business
        AmountImpairment of goodwill

$
43,302Impairment of equipment


5,675Impairment of goodwill and
    equipment


48,977Severance and benefit costs


219Loss on leased facilities


80Other


250$
49,526   (b)
    Period
    Ended August 31, 2004  Successor
    Business
   66




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    AmountSeverance and benefits costs

$
545Loss on leased equipment


480Other


275$
1,300       Lease PaymentsSeverance and


on EquipmentBenefits


and Facilities


Other


TotalAccrual as of April 17, 2004

$
126


$



$



$
126Provision


545



480



275



1,300Cash payment


(123
)


(104
)


(87
)


(314
)Accrual as of August 31, 2004


548



376



188



1,112Provision


420



232



163



815Cash Payment


(869
)


(608
)


(243
)


(1,720
)Accrual as of August 31, 2005


99







108



207Cash Payment


(99
)






(108
)


(207
)Accrual as of August 31, 2006

$



$



$



$
   (13)  Segment
    Information
    PredecessorSuccessor Business



BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31, 2006


August 31, 2005


August 31, 2004



April 16, 2004Net sales:U.S.A.

$
444,277


$
405,886


$
169,815



$
461,086Other North and Latin America


87,512



58,733



15,923




37,040Europe


58,730



52,427



19,889




89,983Asia


116,887



90,253



28,050




71,062$
707,406


$
607,299


$
233,677



$
659,171  67




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  August 31,2006


2005Property and equipment:U.S.A.

$
5,400


$
4,240Other North and Latin America


15,861



2,152Europe


49



36Asia


4,661



4,881$
25,971


$
11,309   (14)  Major
    Customers
    Successor Business



Predecessor BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31, 2006


August 31, 2005


August 31, 2004



April 16, 2004Amount


Percent


Amount


Percent


Amount


Percent



Amount


PercentCustomer A

$
319,091



45
%

$
278,536



46
%

$
116,224



49
%


$
467,744



71
%Customer B

$
99,892



14
%

$
107,694



18
%

$
39,420



17
%


$




     (15)  Other
    Income (Expense), Net
    PredecessorSuccessor Business



BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31, 2006


August 31, 2005


August 31 2004



April 16, 2004Gain on derivative instruments

$
2,287


$



$




$
Foreign currency gains (losses)


(175
)


293



546




(13
)Other


455



188



(95
)



(135
)Total

$
2,567


$
481


$
451



$
(148
)  68




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  (16)  Interest
    Income (Expense), Net
    PredecessorSuccessor Business



BusinessYear Ended


Year Ended


Period Ended



Period EndedAugust 31, 2006


August 31, 2005


August 31, 2004



April 16, 2004Interest income

$
2,173


$
1,005


$
69



$
299Interest expense


(17,326
)


(8,003
)


(996
)



(129
)Interest income (expense), net

$
(15,153
)

$
(6,998
)

$
(927
)


$
170     (17)  Subsidiary
    Guarantors
   69




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  (18)  Selected
    Quarterly Financial Data (Unaudited)
    Three Months EndedNovember 30,


February 28,


May 31,


August 31,


November 30,


February 28,


May 31,


August 31,2004


2005


2005


2005


2005


2006


2006


2006(In thousands, except for per share data)Statement of Operations
    Data:Net Sales

$
154,490


$
164,417


$
146,784


$
141,608


$
158,262


$
163,732


$
188,459


$
196,953Cost of Sales


132,645



140,092



121,441



111,805



127,661



133,987



155,711



163,476Gross Profit


21,845



24,325



25,343



29,803



30,601



29,745



32,748



33,477Operating expenses:Research and development


2,619



2,209



2,097



2,772



3,468



3,912



4,173



3,992Selling, general and administrative


11,264



11,000



11,172



13,200



12,902



12,862



14,194



14,959Advisory service agreements
    fees


625



625



625



713



750



9,553







Restructuring and impairment costs


880



























Total opening expenses


15,388



13,834



13,894



16,685



17,120



26,327



18,367



18,951Income from operations


6,457



10,491



11,449



13,118



13,481



3,418



14,381



14,526Interest expense, net


(543
)


(562
)


(3,176
)


(2,717
)


(2,982
)


(2,891
)


(7,577
)


(1,703
)Other income (expense), net


(251
)


412



295



25



131



246



1,999



191Total other expense


(794
)


(150
)


(2,881
)


(2,692
)


(2,851
)


(2,645
)


(5,578
)


(1,512
)Income before provision (benefit)
    for income taxes


5,663



10,341



8,568



10,426



10,630



773



8,803



13,014Provision (benefit) for income taxes


1,473



2,565



2,983



1,781



1,284



(10
)


2,347



(2,707
)Net income

$
4,190


$
7,776


$
5,585


$
8,645


$
9,346


$
783


$
6,456


$
15,721Net income per ordinary share, basic

$
0.09


$
0.16


$
0.11


$
0.18


$
0.19


$
0.02


$
0.11


$
0.27Shares used in computing basic net
    income per ordinary share


48,872



48,872



48,872



48,872



49,071



51,273



58,335



58,416Net income per ordinary share,
    diluted

$
0.08


$
0.15


$
0.10


$
0.16


$
0.17


$
0.01


$
0.10


$
0.25Shares used in computing diluted
    income per ordinary share


53,104



53,518



53,793



53,708



53,738



56,304



63,444



63,308    70




---



##### Table of Contents



INDEPENDENT
    AUDITORS REPORT
    TO THE BOARD OF DIRECTORS  (COMPANY NO. 458945  M)
          
  
    71




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
 BALANCE
    SHEETS  August 31, 2006 and 2005
  Note


2006


2005(Ringgit Malaysiain thousands)Property, plant and
    equipment


3



14,453



15,641Current assetsInventories (at cost)


4



61,034



56,519Trade and other receivables


5



311,304



212,172Tax recoverable






28



106Cash and cash equivalents


6



83,768



105,482456,134



374,279Current liabilitiesTrade and other payables


7



297,931



218,986297,931



218,986Net current assets






158,203



155,293172,656



170,934Financed by:Capital and reservesShare capital


8



11,650



11,650Reserves


9



160,956



159,234Shareholders
    funds






172,606



170,884Long term liabilityNon-cumulative redeemable
    preference shares


10



50



50172,656



170,934    72




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
 INCOME
    STATEMENTS

For the years ended August 31, 2006, 2005 and
    2004 Note


2006


2005


2004(Ringgit Malaysia in thousands)Revenue


11



1,807,701



1,501,905



1,351,560Cost of sales






(1,695,365
)


(1,413,087
)


(1,251,822
)Gross profit






112,336



88,818



99,738Distribution costs






(10,766
)


(10,813
)


(8,164
)Administrative expenses






(30,476
)


(17,831
)


(22,137
)Other operating expenses






(22,363
)


(11,656
)


(23,677
)Other operating income






944



1,311



700Operating profit


12



49,675



49,829



46,460Financing costs






(12
)


(3
)


(62
)Profit before tax






49,663



49,826



46,398Tax expense


13



(2,653
)


(1,977
)


(196
)Net profit after tax for the
    year






47,010



47,849



46,202    73




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
 STATEMENTS
    OF CHANGES IN SHAREHOLDERS EQUITY  Share


Share


RetainedNote


Capital


Premium


Profits


Total(Ringgit Malaysia in thousands)Balances as of August 31,
    2003






250



1,190



149,097



150,537Issue of shares






11,400











11,400Dividends


14











(79,407
)


(79,407
)Net profit for the year














46,202



46,202Balances as of August 31,
    2004






11,650



1,190



115,892



128,732Dividends


14











(5,697
)


(5,697
)Net profit for the year














47,849



47,849Balances as of August 31,
    2005






11,650



1,190



158,044



170,884Dividends


14











(45,288
)


(45,288
)Net profit for the year














47,010



47,010Balances as of August 31,
    2006






11,650



1,190



159,766



172,606    74




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  CASH FLOW STATEMENTS
 August 31, 2006, 2005 and 2004
  Cash flows from operating activities

2006


2005


2004(Ringgit Malaysia in thousands)Income before provision for income
    taxes


49,663



49,826



46,398Adjustments for:(Gain)/Loss on disposal of plant
    and equipment


(273
)






625Depreciation


6,106



6,457



7,642Interest expense










56Interest income


(944
)


(1,311
)


(700
)Dividend payable on
    non  cumulative redeemable preference shares
    classified as financing costs


12



3



6Operating profit before working
    capital changes


54,564



54,975



54,027Increase in:Inventories


(4,515
)


(7,043
)


(15,281
)Trade and other receivables


(99,132
)


(25,187
)


(47,033
)Increase in trade and other
    payables


78,945



15,288



48,983Cash generated from operations


29,862



38,033



40,696Income taxes paid


(2,575
)


(2,430
)


(84
)Net cash generated from
    operating activities


27,287



35,603



40,612Cash flows from investing
    activitiesWithdrawal of pledged short term
    deposits


200







Interest received


944



1,311



700Purchase of plant and equipment


(5,709
)


(5,680
)


(2,512
)Proceeds from disposal of plant
    and equipment


1,064



716



41Net cash used in investing
    activities


(3,501
)


(3,653
)


(1,771
)Cash flows from financing
    activitiesDividends paid 
    ordinary shares


(45,288
)


(5,697
)


(79,407
) non-cumulative
    redeemable preference shares


(12
)


(3
)


(6
)Proceeds from issue of shares










11,400Interest paid










(56
)Net cash used in financing
    activities


(45,300
)


(5,700
)


(68,069
)Net (decrease)/increase in cash
    and cash equivalents


(21,514
)


26,250



(29,228
)Cash and cash equivalents at
    beginning of year


105,282



79,032



108,260Cash and cash equivalents at
    end of year


83,768



105,282



79,032    75




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  CASH FLOW STATEMENTS  (Continued)
 August 31, 2006, 2005 and 2004
  NOTE
  Cash
    and cash equivalents
    2006


2005


2004(Ringgit Malaysia in thousands)Short term deposits with a
    licensed bank (exclude pledged deposits)






68,979



53,686Cash and bank balances


83,768



36,303



25,34683,768



105,282



79,032    76




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL STATEMENTS
  (1)  Business
    and organization
  rd 251-A,
  (2)  Summary
    of significant accounting policies
    (a)
    Basis
    of accounting    (b)
    Property,
    plant and equipment      Depreciation
  expenditure-in-progress
      Building and improvement

2% - 33%Plant and machinery

20% - 50%Computers

50%Furniture, fittings and office
    equipment

20% - 50%     (c)
    Impairment   77




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
      (d)
    Inventories  first-in, work-in-progress
  (e)
    Trade
    and other receivables    (f)
    Cash
    and cash equivalents    (g)
    Liabilities    (h)
    Provisions    (i)
    Non-Cumulative
    Redeemable Preference Shares    (j)
    Research
    and development     78




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
  (k)
    Foreign
    currency transactions      (l)
    Income
    Tax          (m)
    Income
    Recognition  i) Goods
    sold
    ii) Interest
    income
    (n)
    Financing
    costs    (o)
    Employee
    benefits  i) Short
    term employee benefits
   79




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
    ii) Defined
    contribution plans
    (3)  Property,
    plant and equipment
  Furniture,Long Term











Fittings and


CapitalLeasehold


Building and


Plant and





Office


Expenditure-Land


Improvement


Machinery


Computers


Equipment


In-Progress


Total(Ringgit Malaysia in thousands)CostAt September 1, 2005


5,233



6,190



66,435



2,713



644



1,573



82,788Reclassifications






1,573















(1,573
)


Additions






1,655



3,976



78











5,709Disposals






(95
)


(8,988
)


(419
)


(78
)






(9,580
)At August 31, 2006


5,233



9,323



61,423



2,372



566







78,917Accumulated
    depreciationAt September 1, 2005


542



3,639



60,027



2,406



533







67,147Charge for the year


96



986



4,733



242



49







6,106Disposals






(95
)


(8,197
)


(419
)


(78
)






(8,789
)At August 31, 2006


638



4,530



56,563



2,229



504







64,464Net book valueAt August 31, 2006


4,595



4,793



4,860



143



62







14,453At August 31, 2005


4,691



2,551



6,408



307



111



1,573



15,641Depreciation charge for the year
    endedAugust 31, 2005


96



553



5,582



173



53







6,457August 31, 2004


96



588



6,761



139



58







7,642     2006


2005(Ringgit Malaysia in thousands) Depreciation expense


3,186



3,444 Research and
    development (R&D) expenditure (being
    depreciation on equipment used for R&D purposes)


2,920



3,0136,106



6,457  80




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
  (4)  Inventories,
    at cost
  2006


2005(Ringgit Malaysiain thousands)Raw materials


28,379



28,951Work-in-progress


1,291



5,256Manufactured inventories


17,333



12,951Trading inventories


14,031



9,36161,034



56,519   (5)  Trade
    and other receivables
  2006


2005(Ringgit Malaysiain thousands)Trade receivables Related corporations


71,914



28,891 Others


215,248



169,283287,162



198,174Other receivables, deposits and
    prepayments Related corporations






1,483 Others


24,142



12,51524,142



13,998311,304



212,172   (6)  Cash
    and cash equivalents
  2006


2005(Ringgit Malaysiain thousands)Short term deposits with licensed
    banks






69,179Cash and bank balances


83,768



36,30383,768



105,482    81




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
  (7)  Trade
    and other payables
  2006


2005(Ringgit Malaysiain thousands)Trade payables Related corporations


64,901



3,925 Others


215,933



173,151280,834



177,076Other payables and accrued expenses Ultimate holding
    corporation






1,179 Related corporation


2,708



16,656 Others


14,389



24,07517,097



41,910297,931



218,986           (8)  Share
    capital
  2006


2005(Ringgit Malaysiain thousands)Authorized:Ordinary shares of RM1 eachAt beginning of the year


24,750



24,750Addition during the year






At end of the year


24,750



24,750Issued and fully paid:Ordinary shares of RM1 eachAt beginning of the year


11,650



11,650Issue of ordinary shares of RM1
    each






At end of the year


11,650



11,650  82




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
  (9)  Reserves
  2006


2005(Ringgit Malaysiain thousands)Non-DistributableShare premium


1,190



1,190DistributableRetained profits


159,766



158,044160,956



159,234       (10)  Non-cumulative
    redeemable preference shares
  2006


2005(Ringgit Malaysia in thousands)Authorized:Non-Cumulative Redeemable
    Preference Shares of RM1 each Authorized:At beginning/end of the year


250



250Issued and fully paid:Non-Cumulative Redeemable
    Preference Shares of RM1 each Authorized:At beginning/end of the year


50



50           and/or
     83




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
    (11)  Revenue
    (12)  Operating
    profit
    2006


2005


2004(Ringgit Malaysia in thousands)After charging:Auditors remuneration


224



402



25Directors emoluments


1,269



835



869Depreciation (Note 3)


3,186



3,444



4,146Allowance for doubtful debts


6







4,915Rental of building


520



672



651Rental of equipment






28



116Unrealized loss on foreign exchange


3,047



1,067



Realized loss on foreign exchange


1,132







Staff costs (excluding
    directors emoluments)


19,582



16,350



15,643Research and development
    expenditure*


18,633



9,686



20,929Allowance for inventory
    obsolescence


808



13,301



7,882Loss on disposal of plant and
    equipment










625and crediting:Interest income


944



1,311



700Gain on disposal of plant and
    equipment


273







Reversal of rental of equipment


305







Unrealized gain on foreign exchange










8Realized gain on foreign exchange






333



162Reversal of allowance for doubtful
    debts






797



     *
    
    The following are included in research and development
    expenditure:  2006


2005


2004(Ringgit Malaysia in thousands)Directors emoluments


654



395



420Depreciation (Note 3)


2,920



3,013



3,496Rental of building










Rental of equipment


4







Staff costs (excluding
    directors emoluments)


3,002



2,260



2,226    84




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
      (13)  Tax
    expense
  2006


2005


2004(Ringgit Malaysia in thousands)Current tax expense Based on results for
    the year


2,695



2,372



196 Prior years


(42
)


(395
)


2,653



1,977



196   Reconciliation
    of effective tax expense
  2006


2005


2004(Ringgit Malaysia in thousands)Profit before tax


49,663



49,826



46,398Income tax using Malaysian tax rate


13,906



13,951



12,992Non-deductible expenses


2,164



316



1,259Deferred tax benefits not
    recognized due to tax holidays


(1,219
)


826



2,754Tax incentives


(12,227
)


(12,740
)


(16,836
)Others


71



19



272,695



2,372



196Over provision in prior years


(42
)


(395
)


2,653



1,977



196         (14)  Dividends
  2006


2005


2004(Ringgit Malaysia in thousands)Interim dividends on ordinary
    shares 388.74% tax exempt
    (2005: 48.90% tax exempt; 2004:24163.76% tax exempt)


45,288



5,697



60,409 Nil (2005: Nil% tax
    exempt; 2004: 163.06% tax exempt)










18,99845,288



5,697



79,407  85




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
  (15)  Deferred
    tax
    2006


2005


2004(Ringgit Malaysia in thousands)Property, plant and equipment capital allowances


5,260



6,092



6,412Other deductible temporary
    differences


13,819



17,342



10,91419,079



23,434



17,326       (16)  Significant
    inter-company transactions
  2006


2005


2004*(Ringgit Malaysia in thousands)Ultimate holding corporation Solectron
    CorporationPurchases










202Immediate Holding Corporation Smart Modular
    Technologies, Inc.Sales










80,197Purchases










144,614Purchase of plant and equipment










Allocation of research &
    development costs










5,829Allocation of management and other
    expenses










6,274Related corporationsSales










143,130Purchases










17,015Purchase of plant and equipment










639   2006


2005


2004#(Ringgit Malaysia in thousands)Related corporationsSales


110,066



51,002



44,318Purchases


195,687



198,391



82,442Purchase of plant and equipment










19Allocation of research &
    development costs


4,824



3,986



3,910Allocation of management and other
    expenses


17,489



12,670



3,735  86




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
    *
    
    transactions prior to the divestment by Solectron Corporation
    on April 16, 2004#
    
    transactions subsequent to the divestment by Solectron
    Corporation on April 16, 2004    (17)  Capital
    commitments
  2006


2005(Ringgit Malaysia in thousands)Property, plant and equipment Contracted but not
    provided for in the financial statements






1,409   (18)  Contingent
    liability
    (19)  Financial
    instruments
  Financial
    risk management objectives and policies
    Credit
    risk
        Foreign
    currency risk
   87




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
  Effective
    interest rates and repricing analysis
    EffectiveInterestRate per





Within


1-5Annum


Total


1 Year


Years%


(Ringgit Malaysia in thousands)2006Financial assetBank balances (interest earning)


4.66



63,655



63,655



2005Financial assetShort term deposits with licensed
    banks


2.93



69,179



69,179



   Fair
    values
  Recognized
    financial instruments
      2006


2005Carrying


Fair


Carrying


FairAmount


Value


Amount


Value(Ringgit Malaysia in thousands)Non-cumulative redeemable
    preference shares (NCRPS)


50




#


50




#     #
    
    It was not practicable to estimate the fair value of the
    financial liability without incurring excessive time and costs.
    The financial liability is carried at its original cost as
    stated in the balance sheet and the principal terms of the NCRPS
    are disclosed in Note 10 to the financial statements.   88




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
  (20)  United
    States generally accepted accounting principles
    (a)
    Reconciliation
    of net income    2006


2005


2004(Ringgit Malaysia in thousands)Net profit after tax as reported
    under Malaysian GAAP






47,010



47,849



46,202Adjustment to cost of sales
    arising from the sale of inventories previously written up due
    to acquisition fair market value adjustment


(i
)










(908
)Adjustment to cost of sales for
    depreciation of property, plant and equipment previously written
    up due to acquisition fair market value adjustment


(i
)


(594
)


(594
)


(198
)Adjustment to cost of sales for
    amortization of intangible assets previously written up due to
    acquisition fair market value adjustment


(i
)


(765
)


(765
)


(255
)Adjustment to distribution cost
    for amortization of intangible assets previously written up due
    to acquisition fair market value adjustment


(i
)


(2,508
)


(2,508
)


(836
)Net profit after tax as reported
    under US GAAP






43,143



43,982



44,005   i)  Acquisition
    fair market value adjustments
  Business Combinations
    ii)  Presentation
    of revenue
     89




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
    2006


2005


2004(Ringgit Malaysia in thousands)Net revenue as reported under
    Malaysian GAAP


1,807,701



1,501,905



1,351,560Cost of sale to be netted against
    revenue


(1,128,289
)


(915,269
)


(613,423
)Net revenue as reported under US
    GAAP


679,412



586,636



738,137   (b)
    Reconciliation
    of Shareholders Equity    2006


2005(Ringgit Malaysiain thousands)Shareholders equity as
    reported under Malaysian GAAP


172,606



170,884Adjustment to record the
    revaluation surplus arising from the fair market value adjustment


17,534



17,534Adjustment for cost of sales
    arising from the sale of inventories previously written up due
    to acquisition fair market value adjustment


(908
)


(908
)Adjustment for depreciation for
    property, plant and equipment previously written up due to
    acquisition fair market value adjustment


(1,386
)


(792
)Adjustment for amortization of
    intangible assets arising from acquisition fair market value
    adjustment


(7,637
)


(4,364
)Adjustment to reduce intangible
    assets for income tax benefit recognized by US affiliate


(7,210
)


Shareholders equity as
    reported under US GAAP


172,999



182,354   (c)
    Balance
    sheet  2006


2005(Ringgit Malaysiain thousands)Total assets as reported under
    Malaysian GAAP






470,587



389,920Adjustment to record property,
    plant and equipment at fair market value, net of accumulated
    depreciation


(i
)


393



987Adjustment to record intangible
    assets at fair market value, net of accumulated amortization


(i
)






10,483Total assets as reported under US
    GAAP






470,980



401,390   (i)
    Acquisition
    fair market value adjustments   90




---



##### Table of Contents



SMART
    MODULAR TECHNOLOGIES SDN. BHD.
    (COMPANY NO. 458945  M)
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
    (ii)  Cash
    and cash equivalents
    (d)
    Statement
    of cash flows   91




---



##### Table of Contents



CONSOLIDATED
    AND COMBINED FINANCIAL STATEMENT SCHEDULE
  The consolidated and combined financial statement
    Schedule II  VALUATION AND
 QUALIFYING ACCOUNTS is filed as part of this
    Form 10-K.
  SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS  Balance at


AdditionsBeginning of


Charged to





Balance atDescription

Period


Operations


(Deductions)


End of Period(Dollars in thousands)Year ended August 31, 2006(Successor Business):Allowance for doubtful accounts
    receivable and credit returns

$
2,629


$
4,323


$
(4,360
)

$
2,592Year ended August 31, 2005(Successor Business):Allowance for doubtful accounts
    receivable and credit returns

$
3,267


$
471


$
(1,109
)

$
2,629Period ended August 31, 2004(Successor Business):Allowance for doubtful accounts
    receivable and credit returns

$
3,547


$
501


$
(781
)

$
3,267Period ended April 16, 2004(Predecessor Business):Allowance for doubtful accounts
    receivable and credit returns

$
2,371


$
1,524


$
(348
)

$
3,547  92




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC.
 SIGNATURES    SMART MODULAR TECHNOLOGIES (WWH), INC.
  By:
    /s/  IAIN
    MACKENZIE    Title:
    President and Chief Executive Officer      Signature

Title

Date/s/  Iain
    MacKenzieIain
    MacKenzie

President, Chief Executive
    Officer and Director
    (Principal Executive Officer)

October 27, 2006/s/  Jack
    A. PachecoJack
    A. Pacheco

Senior Vice President and
    Chief Financial Officer
    (Principal Financial and
    Accounting Officer)

October 27, 2006/s/  Ajay
    ShahAjay
    Shah

Chairman of the Board of
    Directors

October 27, 2006/s/  Eugene
    FrantzEugene
    Frantz

Director

October 27, 2006/s/  Dipanjan
    DebDipanjan
    Deb

Director

October 27, 2006/s/  John
    MarrenJohn
    Marren

Director

October 27, 2006/s/  Chong
    Sup ParkChong
    Sup Park

Director

October 27, 2006/s/  Mukesh
    PatelMukesh
    Patel

Director

October 27, 2006/s/  Ezra
    PerlmanEzra
    Perlman

Director

October 27, 2006/s/  Clifton
    Thomas
    WeatherfordClifton
    Thomas Weatherford

Director

October 27, 2006  93




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.

Document2
.1*

Transaction Agreement, dated
    February 11, 2004, by and among Solectron Corporation,
    Solectron Global Holdings L.P., Solectron Serviços E
    Manufactura Do Brasil Ltda., SMART Modular Technologies, Inc.,
    Modular, Inc., Modular Merger Corporation and Modular (Cayman)
    Inc.3
.1(a)

Form of Amended and Restated
    Memorandum of Association of the Company3
.2(a)

Form of Amended and Restated
    Articles of Association of the Company4
.1(b)

Indenture, dated as of
    March 28, 2005, among the Company, the guarantors party
    thereto and U.S. Bank National Association, as trustee4
.2(b)

Registration Rights Agreement
    dated as of March 28, 2005 between the Company, the
    guarantors party thereto, Citigroup Global Markets Inc. and
    Lehman Brothers, Inc.4
.3(b)

Form of Note (included in
    Exhibit 4.1)4
.4(b)

Form of Exchange Note (included in
    Exhibit 4.1)4
.5(b)

Security Agreement, dated as of
    March 28, 2005, among the Company, the guarantors party
    thereto and U.S. Bank National Association, as trustee4
.6(b)

Intercreditor Agreement, dated as
    of March 28, 2005, among Wells Fargo Foothill, Inc., as
    Credit Agent, U.S. Bank National Association, as trustee,
    and the Company4
.7(b)

Intercompany Subordination
    Agreement, dated as of March 28, 2005, among U.S. Bank
    National Association, as trustee, the Company and the other
    obligors party thereto4
.8(a)

Form of Shareholders
    Agreement among the Company and certain other parties named
    therein4
.9

[Reserved]4
.10(b)

Amended and Restated Loan and
    Security Agreement, dated as of March 28, 2005, by and
    among the Company, SMART Modular Technologies (Europe) Limited,
    SMART Modular Technologies (Puerto Rico) Inc., Wells Fargo
    Foothill, Inc., as Arranger and Administrative Agent, and
    certain other persons named therein4
.11(b)

Amended and Restated Intercompany
    Subordination Agreement, dated as of March 28, 2005, by and
    among the Company, SMART Modular Technologies, Inc., SMART
    Modular Technologies (Europe) Limited, SMART Modular
    Technologies (Puerto Rico), Inc., Wells Fargo Foothill, Inc., as
    Agent, and certain other persons named therein4
.12(b)

First Amendment to Guaranty, dated
    April 20, 2005, among Wells Fargo Foothill, Inc., as Agent,
    and certain other persons named therein10
.1(b)

Form of Indemnification Agreement10
.2(a)

Form of Amended and Restated Stock
    Incentive Plan10
.3(a)

Form of Stock Option Agreement10
.4(b)

Offer Letter, dated
    February 11, 2004, from Modular, L.L.C. to Iain MacKenzie10
.5(b)

Offer Letter, dated April 13,
    2004, from Modular, L.L.C. to Alan Marten10
.6(b)

Offer Letter, dated April 13,
    2004, from Modular, L.L.C. to Wayne Eisenberg10
.7(b)

Offer Letter, dated April 13,
    2004, from Modular, L.L.C. to Michael Rubino10
.8(b)

Offer Letter, dated
    February 12, 2004, from Modular, L.L.C. to Jack A. Pacheco10
.9(b)

USD $40,000,000 Interest Rate Swap
    Transaction, dated April 26, 2005, between the Company and
    Wells Fargo Foothill, Inc.10
.10(b)

USD $41,250,000 Interest Rate Swap
    Transaction, dated April 26, 2005, between the Company and
    Wells Fargo Foothill, Inc.10
.11(b)

ISDA Master Agreement, dated as of
    April 20, 2005, between Wells Fargo Foothill, Inc. and
    SMART Modular Technologies (WWH), Inc.10
.12(b)

Lease Agreement, dated
    April 16, 2004, by and between Solectron USA, Inc. and
    SMART Modular Technologies, Inc., as amended (relating to the
    property at 4211 Starboard Drive, Fremont, California)10
.13(c)

Corporate Purchase Agreement,
    dated as of May 1, 2001, by Compaq Computer Corporation and
    by SMART Modular Technologies, Inc. 94




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##### Table of Contents



Exhibit No.

Document10
.14(d)

Amendment to Corporate Purchase
    Agreement, dated September 1, 2004, between SMART Modular
    Technologies, Inc. and Hewlett-Packard Company10
.15(d)

Amendment Number 2 to Corporate
    Purchase Agreement, dated January 20, 2005, between SMART
    Modular Technologies, Inc. and Hewlett-Packard Company10
.16(b)

Advisory Agreement, dated
    April 16, 2004, between SCP Management Company, L.L.C. and
    SMART Modular Technologies, Inc.10
.17(b)

Letter Amendment, dated
    June 17, 2005, to Advisory Agreement dated April 16,
    2004, between SCP Management Company, L.L.C. and SMART Modular
    Technologies, Inc.10
.18(b)

Advisory Agreement, dated
    April 16, 2004, among SMART Modular Technologies, Inc., T3
    GenPar II, L.P., TPG GenPar III, L.P., and TPG GenPar
    IV, L.P.10
.19(b)

Advisory Agreement, dated
    April 16, 2004, between SMART Modular Technologies, Inc.
    and Francisco Partners, L.P.10
.20(a)

Form of Amendment No. 2 to
    the Advisory Agreement (Exhibit 10.16)10
.21(a)

Form of Amendment No. 1 to
    the Advisory Agreement (Exhibit 10.18)10
.22(a)

Form of Amendment No. 1 to
    the Advisory Agreement (Exhibit 10.19)10
.23(a)

Form of Amended and Restated
    Indemnification Agreement14
.1

SMART Modular Technologies Code of
    Business Conduct and Ethics21
.1

Subsidiaries of the Company23
.1

Consent of Independent Registered
    Public Accounting Firm23
.2

Consent of Independent Auditors31
.1

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200231
.2

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200232


Certifications of the Chief
    Executive Officer and Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Incorporated by reference to the Exhibits filed with Amendment
    No. 1 to the Companys Registration Statement on
    Form S-1,
    filed on November 30, 2005 (File
    No. 333-129134).(a)
    
    Incorporated by reference to the Exhibits filed with Amendment
    No. 3 to the Companys Registration Statement on
    Form S-1,
    filed on January 10, 2006 (File
    No. 333-129134).(b)
    
    Incorporated by reference to the Exhibits filled with the
    Companys Registration Statement on Form
    S-4, filed
    on August 11, 2005 (File
    No. 333-127442).(c)
    
    Incorporated by reference to the Exhibits filed with Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1,
    filed on December 20, 2005 (File
    No. 333-129134).(d)
    
    Incorporated by reference to the Exhibits filed with the
    Companys Registration Statement on Form
    S-1, filed
    on October 19, 2005 (File
    No. 333-129134). 95